2016 (6) TMI 176 - AT - Income Tax

Payment to assessee s husband towards professional assistance given by him - Held that - The assessee enjoys income from pension and medical practice in the field of Cardiology and the assessee also refers patient to various hospitals and had disclosed professional fees which is not a minor income. - Towards earning such huge professional income, the assessee paid a small amount to her husband Shri Pradeep Arora, which is a retired engineer from M/s Seimens Ltd. and has a vast knowledge in the field of medical profession and its administration. Therefore, this payment of professional charges made by the assessee cannot be held as unreasonable or bogus. We cannot forget this fact that similar claim of the assessee has been allowed by the Revenue during the earlier and subsequent assessment year and we are unable to see any valid reason to make such disallowance which has been established by the assessee by way or proper explanation that the professional charges paid to her husband has been incurred against professional assistant extended by him (her husband Shri Pradeep Arora) to her after his retirement from an administrative managerial post. In this situation, we decline to accept disallowance made by A.O and upheld by the CIT(A) and thus we demolish the same. In view of our forgetting discussion, the A.O is directed to delete the addition and to allow the claim of the assessee in this regard. - Decided in favour ofassessee Depreciation claimed on purchase of Honda City and new car - Held that - Assessing Officer reduced sale consideration of old car from the cost of new Maruti Swift and then worked out the deprecation @ 7.5%. We are not in agreement with the calculation made by the A.O in this regard as for calculation of cost of acquisition of a new car the sale consideration of old car may be deducted from but for calculation of deprecation the total cost of a new car has to be taken into consideration and thus, disallowance made by the A.O of ₹ 8,625/- was not called for and we dismiss the same So far as, the depreciation claimed by the assessee on new Honda City Car is concerned the A.O wrongly noted that the car was purchased on 31/3/2006 whereas per list of dates and events the Honda City Car was purchased on 21/3/2006 as per submissions of the assessee. We are not inclined to accept contention of the A.O that the utilization of Honda City Car from professional activity and for stand by purpose does not exist. At the same time, we are not agreement with the explanation of the assessee submitted during the assessment proceedings that the job of the assessee who is a Cardiologist Medical Practitioner is of emergent in nature and some time if one car is showing some trouble so that the assessee has to keep a small car stand by to fulfill her responsibility of the professional work. Therefore, disallowance of deprecation made by the A.O and upheld by the CIT(A) on newly purchase Honda City is not called for and we direct the A.O to allow the same - Decided in favour of assessee Disallowance @ 20% of expenses debited under the head car repair maintenance, car running and maintenance - Held that - Assessee has claimed depreciation on both the cars and we are unable to see that the assessee has any other car for personal use, in this situation, the element of personal use of a car cannot be ruled out and the use of cars for personal use has to be presumed in this situation disallowance has to be made regarding personal use of car towards car running maintenance and repair expenses. In the present case, the Assessing Officer made disallowance of 20% all expenses which has been upheld by the CIT (A). In our considered opinion, while the assessee herself and her husband has a Retired Senior Citizens then the element of personal use cannot be taken @ 20% of total expenditure and to meet the ends of justice we direct the A.O to make disallowance of 10% car running maintenance and repair expenses on account of personal use by the assessee - Decided partly in favour of assessee

Summary

Issues:
1. Disallowance of payment made to husband for professional assistance.
2. Disallowance of depreciation claimed on the purchase of cars.
3. Ad-hoc disallowance of car repair, maintenance, and running expenses.

Analysis:

Issue 1: Disallowance of payment made to husband for professional assistance
The assessee, a medical doctor specializing in Cardiology, filed an appeal against the disallowance of payment made to her husband for professional assistance. The husband, a retired engineer, provided full-time assistance to the assessee in her professional activities. The Revenue disallowed the expenditure, arguing that there was no need for such assistance. However, the Tribunal observed that similar claims had been allowed in earlier and subsequent assessment years. The Tribunal found the payment to be justified, considering the husband's expertise and the substantial professional income earned by the assessee. The disallowance made by the Assessing Officer and upheld by the CIT(A) was overturned, directing the AO to delete the addition and allow the claim.

Issue 2: Disallowance of depreciation claimed on the purchase of cars
The Assessing Officer disallowed the depreciation claimed on the purchase of a Honda City and a Maruti Swift by the assessee. The Tribunal noted discrepancies in the AO's calculations and reasoning. It was observed that the AO incorrectly calculated the depreciation and failed to consider the full cost of the new car for depreciation purposes. The Tribunal disagreed with the AO's findings and directed the AO to allow the depreciation claimed on the Honda City. The disallowance made on the Maruti Swift was also dismissed, as the AO's approach was found to be incorrect.

Issue 3: Ad-hoc disallowance of car repair, maintenance, and running expenses
The AO made an ad-hoc disallowance of expenses debited under car repair, maintenance, and running expenses, alleging personal use by the assessee. The Tribunal noted that the assessee claimed depreciation on both cars and did not have a separate car for personal use. Therefore, the element of personal use had to be presumed. The Tribunal directed the AO to make a reduced disallowance of 10% on car running, maintenance, and repair expenses for personal use by the assessee. The appeal of the assessee was partly allowed, addressing the ad-hoc disallowance issue.

In conclusion, the Tribunal partially allowed the appeal of the assessee, overturning the disallowances made by the AO and CIT(A) on various grounds related to professional assistance payment, depreciation on car purchases, and ad-hoc disallowance of car expenses.